Ryan Daniel Moran (Capitalism.com) explains three types of money: cash flow (operational income), wealth (assets that generate value without active work, e.g., stocks and real estate), and enterprise value (the equity value of a business). He argues many entrepreneurs over-focus on cash flow and suggests prioritizing building enterprise value to accelerate wealth accumulation and eliminate cash-flow concerns.
There's three types of money. There's cash flow, there's wealth, and there's enterprise value. Cash flow is obvious. If you don't know what that is, you shouldn't be an entrepreneur. Wealth is the value of the things that you own without you having to work for it, like stocks and real estate and that kind of stuff. An enterprise value is the equity value of the business that you are building. Most entrepreneurs just optimize for cash flow because most of us grew up not having enough of it. And we think that if we get enough cash flow, then eventually we'll invest the profits, we'll build wealth, and then we'll build the business that has enterprise value. But the faster you can reverse the order, the faster you'll be wealthy. The faster you can think about enterprise value, meaning building a business that has value when you sell it, the faster you'll build your wealth. And as a result, you'll never have to worry about cash flow ever again.
